There’s a relatively new children’s book out now entitled, "The Wolf Who Cried Boy". It’s a humorous take on the old fable and I read it outloud one evening this week at home.

I can’t help but be reminded of both the classic and new story, reading all of the hyperbole and hype of the last 24 hours regarding the new Ledbetter Fair Pay Act and those who are quick to predict that the floodgates of employment litigation are now open.

Let’s clarify a few issues up front:

Is the Ledbetter Fair Pay Act important for employers to understand? Sure, just as all changes to employment laws are important.
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Does it dramatically change the law? Not really. Before this law, employers still weren’t allowed to engage in pay discrimination; it’s just that the time frames for bringing suit under some pay discrimination claims had been defined narrowly by the U.S. Supreme Court in 2007. This Act extends the time frame for bringing suit by treating each new paycheck as a basis for a discrimination lawsuit, rather than just the original decision to discriminate.

Will this lead to a dramatic upturn in pay discrimination lawsuits? The jury is definitely still out on this one.

Here’s the greater perspective. Before the U.S. Supreme Court decision in 2007, women could bring pay discrimination lawsuits under both Title VII’s overall scheme, or the Equal Pay Act. For reasons that are still not fully known (though discussed by National Journal’s Stuart Taylor here (H/T Point of Law)) , Ms. Ledbetter did not pursue her Equal Pay Act claim on appeal after it was dismissed on the merits (effectively forfeiting it). The U.S. Supreme Court ruled only that for pay discrimination claims brought under Title VII, a 180-day statute of limitations applied to pay discrimination decisions..

Thus, after Ledbetter, if the employer’s discriminatory pay decision occurred in 2007, the employee was out of luck now to sue under Title VII. Each new paycheck was not an "act" of discrimination.

The new law treats each paycheck as a new "act" of discrimination, effectively re-starting the statute of limitations each time a paycheck is issued.

But here’s why the fuss about the new act is overblown. The employee still could sue under the Equal Pay Act. Indeed, employers should be much more concerned about the Equal Pay Act — which was unaffected by the Fair Pay Act — when it comes to pay discrimination claims.

Unlike Title VII pay discrimination claims, employees do not need to file their Equal Pay Act claims with the EEOC, and claimants have two years in which to file their claim under the Act (three years if the violation is willful).

But here’s the kicker for Equal Pay Act claims: The employee does not need to prove discriminatory intent, unlike Title VII. In fact, the Equal Pay Act focuses on disparity in pay for substantially similar work; contrast that with Title VII which focuses on a discriminatory action that causes a disparity in pay. So, when the employee is paid less than similarly situated employees of the opposite sex, an Equal Pay Act claim can arise without showing that the employer intended to discriminate.

Does this mean that employers have no reason to be concerned about the Ledbetter Fair Pay Act? Of course not. The act has the potential of opening of employers to older claims of discrimination against managers and supervisors who have long since gone. But remember, employees will still need to show that the employer intended to discriminate — a burden that is not insignificant. And former employees are not going to be able to revive a claim of pay discrimination without a recent "paycheck" to go along with it.

There is another bill that would change the underlying law that employers should follow closely — the Paycheck Fairness Act (H.R. 12). The Paycheck Fairness Act would limit an employer’s ability to justify paying different salaries to workers based in different locations with different costs of living. The bill would lift the caps on compensatory or punitive damages for which employers would be liable, in addition to current liability for back pay. These damage penalties would apply to even unintentional pay disparities.

For employers, the Ledbetter Fair Pay Act should just be another reminder to be vigilant in the monitoring of your compensation practices. The EEOC’s Compliance Manual (H/T Moore) gives some suggestions on the issues that employers can review to determine their compliance with the applicable laws.

There’s little reason for employers to cry "wolf" or "boy" over this latest Act. Stay focused and use this current annual review season to ensure that your pay practices are supported by accurate data and are fair.

Much of what you think you know about it is wrong, argues Stuart Taylor, Jr. at National Journal. Hans Bader is even more critical of the factual representations being made by many advocates of the law, while Jane Genova wonders…

About Daniel Schwartz

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More than anything else, employment law is about relationships. Where other areas of of the law seemingly exist more on sheets of paper than in reality, employment law depends heavily on the interpersonal relationships between employers and employees. The rules governing these relationships are limitless, but it is my job as an employment lawyer to take complicated (and confusing) laws and break them into understandable concepts. That’s what I do on this publication, and that’s what I do in my practice everyday. More +

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